Watchdog administering RHI did not inform Stormont about loophole that allowed abuse
THE head of a UK energy watchdog regulating the botched Renewable Heat Incentive (RHI) scheme has expressed “regret” that his organisation didn’t share information about its potential abuses with Stormont officials.
Day 100 of the RHI Inquiry focused on energy regulator Ofgem (the Office of Gas and Electricity Markets), which failed to effectively advise the Department of Enterprise, Trade and Investment (Deti) about a loophole known as “gaming”.
This meant scheme users could install multiple small boilers and claim a higher level of subsidy, instead of installing a larger, more efficient system.
Some 75% of installations under the scheme had multiple boilers.
Ofgem has faced criticism for allowing abuse of taxpayers’ money while administering the scheme.
Facing questioning, Ofgem chief executive Dermot Nolan said it didn’t believe it had a role to prevent gaming, but instead focused on technical compliance of the boilers.
Gaming was one of the biggest issues that led to the projected £490m overspend of the scheme.
Inquiry counsel Joseph Aiken said this lack of communication between Deti and Ofgem amounted to a “major systems failure” and led to public money “literally going up in smoke”.
Deti set up the ill-fated green energy initiative in 2012, with Ofgem tasked with running it. Ofgem’s contractors were required to visit businesses and farms to check that boiler installations were compliant and to detect any fraud.
However, only 31 installations were checked in the first three years of the scheme, despite 2,120 applications.
Mr Nolan described the finding as “sobering” and admitted that Ofgem had been “far from perfect” when sharing key information with Deti.
He added: “I have accepted that there were significant failings.
“It seems that somehow people didn’t think that it was their function to deal with gaming with the scheme. It may not sound terribly impressive but it’s broadly the truth.”
Mr Nolan added that he believed both agencies, Deti and Ofgem, were “culpable”.
He also acknowledged that Ofgem’s relationship with Deti was “not as effective” as it was with the department running the RHI scheme in Britain.
Difficulties around the sharing of data between Ofgem and Deti have also been probed by the inquiry, which has heard about a lack of auditing.
Inquiry chairman Sir Patrick Coghlin said the purpose of this was to ensure that a representative number of installations were looked at in Northern Ireland, but no one took those steps. He said Ofgem would have had the ability to smell the “odour of gaming”, but this wasn’t referred to Deti.
Mr Nolan has acknowledged that not enough audits were carried out for RHI. When asked why the audit reports were not forwarded to Deti, he replied that had these been asked for, they would have been provided.
The inquiry also heard that Ofgem did not make Deti explicitly aware of the “phenomena” of the use of multiple boilers with heating systems serving the same loads until late 2014 or early 2015.
At this point the scheme was facing huge budgetary pressures. Mr Nolan accepted that Ofgem “probably should have” made this information available.
Unlike in Britain, no cap or payment tier system was placed on the money that could be claimed in proportion to the size of boiler here.
In effect, this enabled unnecessary heat to be burned just to make money.
Mr Nolan said it was his understanding that Deti had insisted to Ofgem that they were “absolutely not going to do tiering”.
Sir Patrick described the revelation as “news” to the panel.